The top foreign policy officials of the Obama administration travelled to the border between the two Koreas yesterday to announce new sanctions targeting the financial interests of the North's leadership.

During a visit designed as an elaborate show of support for the South, the Secretary of State Hillary Clinton detailed the new focus of US attempts to dissuade Pyongyang from pursuing its nuclear ambitions. US officials believe a power struggle in the North has been exacerbated by dictator Kim Jong-il's failing health.

Confident that looks don't kill, Mrs Clinton and the Defence Secretary Robert Gates toured the Panmunjom truce village in the demilitarised zone (DMZ) between the two countries, at one point drawing the gaze of a soldier from the North through a pane of glass.

Earlier, Mr Gates had confirmed plans to hold extensive joint naval exercises with South Korea both in the Japan Sea to the east of the Korean peninsula and off its western shores in waters where China has also held exercises. China voiced fresh concern at the US moves.

Ostensibly organised to mark the 60th anniversary of the start of the Korean War, the visit by the two leading members of Barack Obama's cabinet was clearly designed to send a message of impatience two months after an investigation concluded that Pyongyang was behind the sinking of a South Korean naval frigate in March which cost the lives of 46 sailors.

North Korea looked set to escape explicit rebuke at the Asia-Pacific's biggest security forum yesterday over the sinking of the warship. The 10-member Association of South-east Asian Nations showed no sign of going beyond a statement on Tuesday that "deplored" the sinking and the rise in tensions, but stopped short of blaming Pyongyang.

Mrs Clinton yesterday said the new sanctions, which come on top of UN sanctions imposed in an effort to deflect the North from developing its nuclear arsenal, were specifically targeted at the North Korean leadership and not at its population which is suffering through an implosion of the national economy made considerably worse last year by the disastrous introduction of a new currency. The sanctions will be aimed at curbing Pyongyang's ability to generate cash for its leadership and cronies through elaborate counterfeiting, smuggling and money laundering.

"We are aiming very specifically, after much intensive research built on what was done before but not limited to that, to target the leadership, to target their assets," Mrs Clinton told reporters at a press conference in Seoul. She said that the US would return to talks with North Korea only if it sent a "positive signal" on ending its belligerent stance and accepting calls that it abandons its nuclear arms programme.

"North Korea can cease its provocative behaviour, halt its threat and belligerence towards its neighbours, take irreversible steps to fulfil its denuclearisation commitments and comply with international law," she said. "If North Korea chooses that path, sanctions will be lifted, energy and other economic assistance will be provided, its relations with the US will be normalised."

In the DMZ, where tensions have risen since the March sinking of the frigate, the two American visitors clambered up an observation tower and stopped by a building that straddles the border itself. They were pictured by a window through which a North Korean guard stared without expression.

Mr Gates reflected later on what he saw. "In the 20 years since I last climbed that observation tower and looked out across the DMZ, it's stunning how little has changed up there and yet how much South Korea continues to grow and prosper. The North, by contrast, stagnates in isolation and deprivation."

According to its usual script, the regime issued an angry response to the US plans for new military exercises, which will involve some 8,000 servicemen, 100 aircraft and 20-odd ships, including the enormous USS George Washington aircraft carrier. "The puppet warmongers declared that the projected military manoeuvres, the largest in the history of naval military exercises, are aimed to tighten the 'alliance' for invading the DPRK," the news agency said in an English language report.

The US and South Korea governments agreed to go forward with exercises in waters on both sides of the peninsula even though the reaction from Beijing, which remains the last major protector of North Korea, was sure to be frosty. "We urge relevant parties to remain calm and exercise restraint and not do anything to exacerbate regional tensions," a Chinese Foreign Ministry spokesman, Qin Gang, said in a statement.

The Chinese government has yet to accept the findings of the international inquiry, headed by Seoul, that the sinking the ship in March was the work of the North Korean navy.

Panmunjom: Life on the edge

Nestled on the border that was once the front line in a proxy war between the USSR and the West, the so-called truce village of Panmunjom – also called the Joint Security Area – has a long and complex history. In 1953, it was the location of the signing of the armistice that ended the Korean War. Today, it is a mere sprinkling of huts, standing directly on the military demarcation line. But it remains of critical importance as the only venue for talks between the North and South. It also draws a stream of tourists, who sign a disclaimer warning they may die as "a direct result of enemy action". The threat is not idle: in 1976, two US officers were killed with their own axes by North Korean soldiers. (South Koreans are barred from visiting.) From the southern side, visitors can peer at the soldiers from the North; they can also see a 160m flagpole, the world's tallest, bearing the North Korean flag.

Nor is it the only village in the DMZ. One other village in the South, Daeseong-dong – or 'Freedom village' – is home to 210 people who are paid to stay put. There is said to be another village in the North, though reports in the South suggest it is uninhabited.